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February 5, 2018

Eurex Clearing is spreading the news that it has passed the European Securities and Markets Authority (ESMA)'s second European Union-wide stress test, which was carried out recently to assess the resilience of central counterparties (CCPs) in stressed market conditions.

"The stress test is an important contribution to ensuring financial stability in Europe, given the important role of central counterparties," says Thomas Laux, chief risk officer at Eurex Clearing. "This shows once again that our CCP offers stability to its clearing community and to the markets in general, even under stressed conditions."

The tests proved both the robustness of Eurex Clearing's lines of defense and a strong liquidity management, he added. Receiving a neutral confirmation of sound and appropriate risk and stress testing framework is a well appreciated reward for its work, he said.

ESMA, which published the results on February 2, says they show that overall the system of EU CCPs is resilient to multiple clearing member (CM) defaults and extreme market shocks. In addition, the report also highlights individual CCP-specific results.

ESMA says that under one of the scenarios tested, and in order to assess the resilience of each individual CCP to the default of its most relevant clearing members under harmonised price shocks, it assumed the default of the top two groups of CMs selected for each individual CCP.

The defaulting CMs could be different for each CCP under this particular scenario, but still using the common market stress scenarios. This scenario produced the following results:

For BME Clearing, this led to a minor shortfall of required prefunded resources. It adds that the shortfall is only marginal and with no systemic impact.

For ICE Clear Europe, the required prefunded resources would be enough, but these would only marginally cover the simulated stress losses. The excess margin held on top of the minimum required, could also significantly reduce the consumption of pre-funded resources.





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Eurex Clearing is spreading the news that it has passed the European Securities and Markets Authority (ESMA)'s second European Union-wide stress test, which was carried out recently to assess the resilience of central counterparties (CCPs) in stressed market conditions.

"The stress test is an important contribution to ensuring financial stability in Europe, given the important role of central counterparties," says Thomas Laux, chief risk officer at Eurex Clearing. "This shows once again that our CCP offers stability to its clearing community and to the markets in general, even under stressed conditions."

The tests proved both the robustness of Eurex Clearing's lines of defense and a strong liquidity management, he added. Receiving a neutral confirmation of sound and appropriate risk and stress testing framework is a well appreciated reward for its work, he said.

ESMA, which published the results on February 2, says they show that overall the system of EU CCPs is resilient to multiple clearing member (CM) defaults and extreme market shocks. In addition, the report also highlights individual CCP-specific results.

ESMA says that under one of the scenarios tested, and in order to assess the resilience of each individual CCP to the default of its most relevant clearing members under harmonised price shocks, it assumed the default of the top two groups of CMs selected for each individual CCP.

The defaulting CMs could be different for each CCP under this particular scenario, but still using the common market stress scenarios. This scenario produced the following results:

For BME Clearing, this led to a minor shortfall of required prefunded resources. It adds that the shortfall is only marginal and with no systemic impact.

For ICE Clear Europe, the required prefunded resources would be enough, but these would only marginally cover the simulated stress losses. The excess margin held on top of the minimum required, could also significantly reduce the consumption of pre-funded resources.



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